Mexico’s pipeline imports of U.S. natural gas should continue to grow over the coming years even in the most conservative demand scenarios, experts agreed this week at the US-Mexico Natural Gas Forum.
The power sector is driving demand growth currently, a trend that is likely to continue in the immediate term as state power company Comisión Federal de Electricidad (CFE) expands its fleet of combined-cycle gas turbine plants, energy consultant Guillermo Turrent told the gathering in San Antonio, TX.
Turrent, who is the general manager of Energy and Infrastructure Advisors, highlighted that CFE imports 100% of its gas supply, and company gas imports peaked around 5 Bcf/d last summer.
CFE is building 10 combined-cycle plants that could add about 1 Bcf/d of gas demand by 2025.
Recent data from Wood Mackenzie show that gas demand from Mexico’s power sector averaged 4.72 Bcf/d during the first 10 months of this year, up 462 MMcf/d versus the same period last year.
Expanding Gas Supply
Meanwhile, New Fortress Energy Inc.’s first Fast LNG unit off the coast of Altamira on Mexico’s Atlantic Coast, is slated to begin producing liquefied natural gas this month. The unit has capacity to liquefy about 200 MMcf/d, which would be sourced from the United States via the existing Sur de Texas-Tuxpan (STT) pipeline.
TC Energy Corp.’s 1.3 Bcf/d Southeast Gateway pipeline and Sempra’s 3 million metric tons/year (395 MMcf/d) Energía Costa Azul Phase 1 liquefaction terminal are both targeted to enter service in 2025 as well, adding to the bullish outlook for pipeline imports from the United States.
NGI’s Christopher Lenton, senior editor for Mexico and Latin America, said it’s safe to expect about 2 Bcf/d of gas demand growth in Mexico over the next four years, based purely on already sanctioned projects.
The “wild card,” he said, is the potential for demand growth from other LNG projects that have not reached a final investment decision, as well as from industrial consumers as a result of nearshoring.
Nearshoring refers to companies whose target market is the United States moving their supply chains and production processes out of far-away countries like China and into Mexico. The idea is to avoid supply chain disruptions and costly tariffs by capitalizing on Mexico’s geographic proximity to the United States, and the countries’ long-standing free trade relationship.
Private Investment Stifled?
Progress on nearshoring could be hindered, however, by the “glass ceiling” imposed on Mexico’s economy by its firebrand President Andrés Manuel López Obrador, aka AMLO, according to Rice University’s Tony Payan, who also spoke at the event.
Payan directs the Mexico Center at Rice’s Baker Institute for Public Policy. The stifling of private investment in Mexico’s energy sector by the López Obrador administration, along with regulatory and permitting uncertainty, are among several obstacles to attracting new foreign investment in the country, Payan said.
Despite these challenges, Mexico should continue to see modest economic growth over the coming years, driven largely by trade with the United States, according to Payan.
He also noted that the Frente Amplio political coalition is fielding a strong, business-friendly opposition candidate for the upcoming presidential election in Xochitl Gálvez, an entrepreneur and computer engineer from humble origins who was elected to the Senate in 2018.
Gálvez nonetheless faces an uphill battle against López Obrador’s handpicked heir apparent, Claudia Sheinbaum, said Payan. He explained that the president is throwing the full weight of the government behind Sheinbaum and the Morena political coalition.
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